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KNACK: (The way of best solution for an organization/ project internal audit process 3rd Part)

Every audit solution is based on sound planning and an atmosphere of constructive involvement and communication between the client and the auditor. I see quite a few audit organizations that include how their clients to the audit service process works. It also is designed to provide a resource for sharing tools and techniques for each of the distinct phases of the audit process.

INTERNAL AUDIT PROCEDURES & KNACK During the internal audit process, the Internal Auditor may employ one or more audit techniques. Such techniques include, but are not limited to: I. Observation and Inquiry The Internal Auditor may observe the operation of any College function, activity, department, or unit. The Internal Auditor may also make reasonable inquiries of any College employee in attempting to carry out the internal audit process. II. Analysis and Review A principal means by which the Internal Auditor administers the Colleges internal audit function is through careful analysis and critical review of both financial and operating data. In some cases this will be accomplished through the comparison of current balances with those from prior periods. Another common technique which will be utilized while performing analysis and review activities is the breakdown of individual accounts into their most refined detail so that unusual or significant items are more likely to be highlighted and thus selected for investigation. Other techniques will be used as necessary to accomplish an appropriate level of analytical review during the internal audit process. III. Inspection At his discretion, the Internal Auditor shall have the authority to inspect physical assets, documents, and other evidence supporting relevant data of the auditor under review. This process is usually accomplished by verification of transactions employing the following basic audit techniques: Vouchingthis is the verification of entries by comparing them to the original documents on which they are based. This technique helps ensure the accuracy, genuineness, validity, or truth of the entries under review. Recompilationthis is the process of recalculating selected calculations to determine their accuracy. In applying this technique an auditors footings, adding machine tapes, and spreadsheets shall never be assumed to be correct. Retracing of Bookkeeping Proceduresthis includes tracing postings from original books of entry to ledgers and vice-versa. Physical Examination and Countthis technique is used to substantiate the reliability of the records under examination. In applying this technique, the Internal Auditor shall: (A) identify

what is being examined; (B) determine the existence of the items being examined; (C) determine the condition of the items being examined; and (D) verify the quantity of the items being examined. IV. Confirming The validity of items shown on College records may be established by receiving confirmation directly from a third-party in a position to verify the validity of a given item. Requests for such confirmations must be mailed by the Internal Auditor and are to be accompanied by a return envelope addressed to: V. Scanning This is the process of quickly but carefully scrutinizing a ledger account, document, or any other record for questionable, unusual, or improper items. Scanning will be used in the internal audit process whenever it is determined that this process has a reasonable chance of adding value. VI. Planning During the planning portion of the audit, the auditor notifies the client of the audit, discusses the scope and objectives of the examination in a formal meeting with organization management, gathers information on important processes, evaluates existing controls, and plans the remaining audit steps. VII. Fieldwork This is very critical step as it allows auditor to determine the scope and extent of audit effort. It is done in advance of detailed testing and analysis work. The auditors can familiarize themselves with the system and control structure. Typically the audit team would consider: The organizational structure and the responsibilities of key members. Manuals of policies and procedures and applicable regulations. Management reports and minutes of meeting. Walkthrough of activity Discussions with key personnel The field survey is the initial contact point and might take one or two days depending on the size of the audit. The completion of field survey helps the auditor to understand key systems and processes. If the information during preliminary audit planning is imperfect, the audit team can make adjustments to planned audit scope VIII. Announcement Letter The client is informed of the audit through an announcement or engagement letter from the Internal Audit Director. This letter communicates the scope and objectives of the audit. IX. Initial Meeting During this opening conference meeting, the client describes the unit or system to be reviewed, the organization, available resources and other relevant information. The internal auditor meets with the senior officer directly responsible for the unit under review and any staff members she /he wishes to include. It is important that the client identify issues, X. Preliminary Survey

In this phase the auditor gathers relevant information about the unit in order to obtain a general overview of operations. She/He talks with key personnel and reviews reports, XI. Internal Control Review The auditor will review the unit's internal control structure, a process which is usually timeconsuming. In doing this, the auditor uses a variety of tools and techniques to gather and analyze information about the operation. The review of internal controls helps the auditor determine the areas of highest risk and design tests to be performed in the fieldwork section. XII. Audit Program Preparation of the audit program concludes the preliminary review phase. This program outlines the fieldwork necessary to achieve the audit objectives. XIII. Transaction Testing After completing the preliminary review, the auditor performs the procedures in the audit program. These procedures usually test the major internal controls and the accuracy and propriety of the transactions. XIV. Advice & Informal Communications As the fieldwork progresses, the auditor discusses any significant findings with the client. Hopefully, the client can offer insights and work with the auditor to determine the best method of resolving the finding. Usually these communications are oral. XV. Audit Summary Upon completion of the fieldwork, the auditor summarizes the audit findings, conclusions, and recommendations necessary for the audit report discussion draft. XVI. Working Papers Working papers are a vital tool of the audit profession. They are the support of the audit opinion. They connect the clients accounting records and financials to the auditors opinion. They are comprehensive and serve many functions. XVII. Audit Report Our principal product is the final report in which we express our opinions, present the audit findings, and discuss recommendations for improvements. To facilitate communication and ensure that the recommendations presented in the final report are practical, Internal Audit discusses the rough draft with the client prior to issuing the final report. XVIII. Discussion Draft At the conclusion of fieldwork, the auditor drafts the report. Audit management thoroughly reviews the audit working papers and the discussion draft before it is presented to the client for comment. XIX. Exit Conference

When audit management has approved the discussion draft, Internal Audit meets with the unit's management team to discuss the findings, recommendations, and text of the draft. At this meeting, the client comment on the draft and the group works to reach an agreement on the audit findings. XX. Formal Draft The auditor then prepares a formal draft, taking into account any revisions resulting from the exit conference and other discussions. XXI. Final Report Internal Audit prints and distributes the final report to the unit's operating management, the unit's reporting supervisor, the Vice President for Administration, the University Chief Accountant, and other appropriate members of senior management.. The approval of the Internal Audit Director is required for release of the report outside, XII. Client Response The client has the opportunity to respond to the audit findings prior to issuance of the final report which can be included or attached to final report. However, if the client decides to respond after we issue the report, the first page of the final report is a letter requesting the client's written response to the report recommendations. XXIII. Client Comments Finally, as part of Internal Audit's self-evaluation program, we ask clients to comment on Internal Audit's performance. This feedback has proven to be very beneficial to us, and we have made changes in our procedures as a result of clients' suggestions. XXIV. Audit Follow-Up Within approximately one year of the final report, Internal Audit will perform a follow-up review to verify the resolution of the report findings. XXV. Follow-up Review The client response letter is reviewed and the actions taken to resolve the audit report findings may be tested to ensure that the desired results were achieved. All unresolved findings will be discussed in the follow-up report. XXVI. Follow-up Report The review will conclude with a follow-up report which lists the actions taken by the client to resolve the original report findings. Unresolved findings will also appear in the follow-up report and will include a brief description of the finding, the original audit recommendation, the client response, XXVII. Internal Audit Annual Report to the Board In addition to the distribution discussed earlier, the contents of the audit report, client response, and follow-up report may also communicated to the Audit Committee of the Board as part of the Internal Audit Annual Report.

XXVIII. The Process: A Collaborative Effort As pointed out, during each stage in the audit process--preliminary review, field work, audit reports, and follow-up--clients have the opportunity to participate. There is no doubt that the process works best when client management and Internal Audit have a solid working relationship based on clear and continuing communication. As a result, client can help evaluate the feasibility of making further changes or modifications in your operations. Criteria examples Ensures that all incomes are properly computed and received as at when due Ensures that all payments are disbursed appropriately in accordance with laid down accounting procedures. Ensures that laid down limits of authority are consistent applied. Ensures that all deductions are accounted for as at when due Ensures that the Centre complies with all statutory and international regulations governing Non Governmental Organizations. Regularly seek improvements on the accounting process Ensure that all identified errors and/ or weakness are corrected without delay. Ensure that all stores items are received into the store after due ascertainment. Ensure that all stores cards are posted regularly and up to date SOLUTION: If an internal auditor follow the WAK Model way and he/ she can always worked smoothly and achieve the solution of audit program Original auditors have a huge advantage over those who lack this expertise. Internal auditing departments should train auditors to be inspired and promote a culture where vision additions. On an individual basis, auditors can differentiate themselves by proposing new and innovative approaches to many aspects of their tasks Auditors should be passionate, even obsessed, about planning. Unfortunately, most auditors do not naturally possess this enthusiasm, so adequate time needs to be budgeted for planning, and performance evaluations or incentive programs should reward those who devote time to planning, especially when time is limited. Internal auditors are expected to have a thoughtful audit plan, an excellent working relationship with management, support from the audit committee, and state-of-the-art audit tools. But unless the right people are in place, many internal audit departments won't be able to solution CONCLUSION: The internal auditors are provide a variety of examine of an organizations, but their role of an organization is most major service contract with an self-determining auditing to Express an opinion on the adequacy of policies and procedures within the service Organization that may affect the internal control environment at the client organization The Board appreciated the role of the Internal Auditor when auditing is a technique used by fulfills the organization to evaluate its effectiveness, efficiency, and nature of its operations and report to appropriate Persons the results of the evaluation along with recommendations for improvement. The objectives are to assure management that its goals are being carried out and whether or not they are able of being improved, WAK model is this process that express to whole internal auditing that is based on sound planning and an atmosphere of constructive involvement and communication between the client and the auditor. How the audit process works. It also is designed to provide a resource for sharing tools and techniques for each of the distinct phases of the audit process.